Chapter Four

The Organizing Function

4.1 The concept of organizing and organization structure
Organizing is the process of defining essential relationship among people , tasks, and activities in
such a way that all the organizational resources are integrated and coordinated to accomplish its
objective efficiently and effectively. It is examining how the managerial tasks defined in the
planning stages can be devised and reintegrated to achieve the organizational objectives.
Organizing is establishing effective behavioral relationships among persons so that they may
work together efficiently and gain personal satisfaction in doing selected tasks under given
environmental conditions for the purpose of achieving some goal or objective.
Organizing is the process of identifying and grouping tasks to be performed, assigning responsibility and
delegating authority, and establishing relationships for the purpose of enabling to work most effectively
together in the accomplishment of objectives.
Organizing results in an organization structure that can be thought of as a framework that holds
the various functions together according to the pattern determined by the management. An
organization structure is a tool of management to achieve plans. As plans change, the organization
structure should be responsive. Moreover, even when objectives are similar, what works for one
organization will not necessarily work for another for the purpose.
Organizing involves differentiation and integration.
Differentiation: is the process of departmentalization or segmentation of activities on the basis of
some homogeneity.
Integration: is the process of achieving unity of effort among the various departments
(segments/subjects). The result of organizing process is organization structure.
Organizing structure is a formal framework that shows a set of tasks assigned to individuals,
departments, reporting relationship(including line of authority, decision responsibility, number of
hierarchical levels, and span of managers control), and the design of systems to effectively
coordinate employees across departments.
4.2 Organization Chart
Organization chart is simply a diagram or chart of all the positions in the organization and their
formal relationship to one another.
 Is a simple drawing of lines and boxes that show how the firm is organized? Boxes represent the firm’s
activity and the people who perform these activities. Lines indicate relationship among them.
 People whose jobs are near the top of the chart have more authority and responsibility than those below
them.

B B B B

C C C C

D D D D
An organization chart shows:
Who reports to whom – the chain of command,
How many subordinates work for each manager – the span of control,
Formal channel of communication,
The hierarchy of decision making – where decision maker for a problem is located,
Equal interaction (horizontal lines) etc.
4.3 Types of Organization: Formal & Informal organizations
Organizations can be classified into formal and informal types.
Formal organization
Formal organization is an organization that is deliberately and rationally designed and approved by
management through organizing process to achieve organizational goals/ objectives. It is planned structure
of an organization which is deliberately created to attain desired objectives. It is a system with well-defined
jobs, definite authority, responsibility, and accountability.
Common characteristics of formal organization are
1. Consciously designed: Formal organization are purposefully designed and established to attain
certain end results.
2. Based on delegated authority: In a formal organization each employee has delimited authority;
therefore, there is superior-subordinate relationship.
3. Organizational chart is drawn: Organizational chart shows jobs & departments, and it is the
most tangible depiction/ picture of an organizational structure.
4. Deliberately impersonal: Positions in an organization are not personal properties. They are
always open to someone who fit the position. People who meet the requirements of the job can fulfill
the position.
Informal organization
Informal organization refers to people in-group associations, but these associations are not specified in the
structure of the formal organization. They are not included or established deliberately/ officially in the
formal organization channel but formed adjacent to the formal organization. They always exist in the formal
organization; nothing can destroy them; they cannot be avoided. They are natural grouping of people in the
work situation based on their behavioral patterns; interests; beliefs; objectives; etc.
No conscious attempt is made to create it. Informal organization may affect formal organizations positively
or negatively. Managers should recognize that it exists in a formal organization; and should try to use it for
the benefit of the formal organization.
Reasons for the formation of informal organization are
1. Mutual benefit: Members of an organization have their own personal interests that tied them to
their colleagues so as to meet these interests. Hence the communality of people’s interest in the formal
organizations leads to the formation of informal organization.
2. Friendship: Members of an organization establish friendship among themselves due to different
reasons. This friendship among the members paves the way for the formation of informal
organization.
3. The need to fulfill social needs: A need to be the member of a society put the workers in the
organization together. Therefore, one of the mechanisms through which people in the organization
meet their social needs is being the member of informal organization.
4. Physical work condition: People working in the same unit are closely related. Hence, working in
proximity or together is one of the reasons for the formation of informal organization.
5. Administrative practice: Some managers encourage while others suppress the formation of
informal organization. Thus, the type of management entertained by managers is the result for the
establishment of informal organization.
Characteristics of informal organization
1. Group norms: This is the core behavior among the workers in the informal organization. There are
agreements/ rules and regulations which may not be written that govern the behavior of members. The
members act accordingly without showing any deviation.
2. Group cohesiveness: Members of the informal organizations basically have strong relationships. The
more the group sticks together the more they will be successful in attaining the objectives.
3. Group leadership: Members in the informal organization select someone who is most active among
the others as a leader, and such people are conventional leaders.
4. Communication network: It is also called grapevine. It is the network outside the formal
communication channel established by the organization.
5. Lifespan and purpose: Informal organizations have short life span in comparison with formal
organization. Therefore, they cease to exist when the members meet their interests and re-established
when another need arises.
6. Existence of a number of informal organizations in a formal organization: The divergent
nature of people’s interest, their feeling, tradition, attitude, etc, lead to the formation of different
informal organizations in a big formal organization
7. Informal organizations gradually can develop into formal organization: Informal
organizations gradually can be emerged as formal organization.
Advantages and disadvantages of informal organizations
Advantages
1. They are additional assets for the formal organization. If informal organizations are properly
associated to the formal organization, they are additional assets for the formal organization because
they may come up with innovative ideas to promote the work of the organizations.
2. They could be useful channels of communication. In the informal organization, information can
be easily and rapidly reach the members of the organization through their informal ways of
communication.
3. They provide satisfaction and stability in the organization. When workers are given
opportunity to establish the informal organizations, they entertain their idea that leads them to be
satisfied and stable in the organization.
4. Their existence alerts managers to plan and act accordingly than otherwise. A manager
becomes watchful more than any other time when there are informal organizations to check whether
they are out of line or not. And if the activities seem against the interest of the formal organization,
necessary measures are taken to normalize or reverse the condition.
5. They inform managers sensitive issues that would be embarrassing if formally released.
Some information may destruct the normal organizational climate if formally released. In such cases,
informal organizations informally disseminate the information to the group’s endurance and then the
manager also becomes aware of the consequences if formally communicated.
Disadvantages
1. Resistance to change: There is often a tendency to resist changes.
2. Role conflict: Both types of organizations have their own objectives. These objectives will not be the
same and this may arise role conflict in the organization.
3. Rumor: Managers may not equally release information to the members of the organization. When
there is too much secrecy or ambiguous situations informal organizations disseminate distorted
information.
4. Conformity: Some leaders of informal organizations may have hidden agenda or promote destructive
actions; hence such leaders may use the members as an instrumental to create challenge to the leaders
of formal organization.
4.4 The Organizing Process
Organizing is an ongoing managerial process whether forming a new organization, or
reorganizing the existing one, managers do take five fundamental steps.
1. Consider Plans and Goals: As noted earlier, plans and their goals affect organizing.
Therefore it is vital for a manager to consider any changes in the plans and goals of the
firms. As a result of changes in plans, new departments may be created and old ones may
be given additional responsibilities and the organizing process must see this in its
telescope.
2. Determine the Work Activities Necessary to Accomplish Objectives: It is the step through
which managers know what tasks must be done. Here, all the necessary activities that
should be incorporated into the business are identified. Once managers know what tasks
are to be done, they can classify and group these activities into manageable work units
3. Classify and Group Activities: This step asks managers to perform three activities. One is
to examine each activity identified to determine its general nature (i.e. marketing,
production, finance, personnel, etc.) The other activity is to group the activities into these
related areas and the remaining one is to establish the basic department design for the
organization structure. While grouping the activities, the management classifies and
clusters the activities by using the guidelines of homogeneity or similarity of activity.
Grouping similar activities is based up on the concept of division of work (labor). Division
of labor is breaking down the work into its basic components.
4. Assign and Delegate Appropriate Authority: The identified essential activities after being
classified and grouped into major operational areas must be assigned the appropriate
authority to accomplish the task. In this step, the type and quantity of authority necessary.
5. Design a Hierarchy of Relationships: This step requires the determination of both vertical
and horizontal operating relationships of the organization as a whole. The vertical
structuring of the organization results in a decision making hierarchy showing who is in
charge of each task, of each specialty area, and of the organization as a whole.
Consequently, the level of management from the bottom to top in the organization and it
will help for the practice of the chain of command, or hierarchy of decision making levels.
On the other hand, horizontal structuring defines the working relationships between
operating departments and also makes the final decision on the span of control (the number
of subordinates under direction of each manager).
4.5. Principles of Organization
Organizing has the following principles.
1. Division of Work: is dividing large tasks into smaller packages of work to be distributed
among several people. In other words, it is breaking down complex organizational tasks in to a
more simple, routine and well defined tasks. It facilitates the organizing process. The
advantage of division of work (specialization) is obviously its direct contribution in upgrading
productivity. However, it has also disadvantages like boredom and absenteeism. In order to
overcome the disadvantages of division of work, managers usually apply concepts like job
enlargement and job enrichment.
2. Departmentalization: Departmentalization is the process of combining jobs (activities) into
groups. These sets of activities may further be sub-divided into sections or units. These
groupings may be done on the basis of primary function such as production, finance, sales,
personnel etc. or it may be done on derivate basis, such as type of customers, geographical
areas etc.
3. Hierarchy (Scalar Chain): Scalar chain represents a line of authority in an organization. It
specifies the order of rank from top management to the lowest level of the enterprise. It is seen
as the end result of organizing process. Scalar chain is instrumental in applying both unity of
command and direction and it can also signify where solution finder for a given problem is
located.
4. Span of Control/Span of Management/: - The span of management or control refers to the
number of people and departments that report directly to a particular manager. Span of Control is
an important decision b/c
- It can affect what happens to work relationships in one particular department.
- It can affect the speed of decision making in situations where multiple levels in the
hierarchy are necessarily involved.
There is no correct number for the span of control. The number of span of control (having wide or
narrow span of control) is determined by the following variables:
- complexity and variety of the subordinates’ work
 The more complex subordinate’s job, the fewer should be number of subordinates
 The more routine the work of subordinates, the greater the number of subordinates.
- the ability and training of the subordinates
 The more capable and experienced the subordinates are, the greater should be the
number of subordinates.
 The more trained the subordinates are, the greater should be the number of
subordinates.
- the ability of the manager
 If the manager has high potential ability, the number of subordinates can be made
too many.
- company’s philosophy for centralization and decentralization
 companies that favor centralization usually has narrow span of control
 companies that encourage decentralization usually display wide span of control
Wide span of management: - it is a flat organizational structure characterized by an overall
broad span of controls, horizontal dispersion, and fewer hierarchical levels. It is resulted from
supervising relatively large number of subordinates.
Merits: Demerits:
- Reduces over head costs - Less control and coordination
- Improved and fast communication - Control and coordination difficult
- Most suited to individuals desiring as the work is highly interlocking.
Challenge, responsibility and autonomy
- Fast decision making
Narrow span of management: - it is a tall organizational structure characterized by narrow
span of control and relatively large number of hierarchical levels. The manager manages small
number of immediate subordinates.
Merits: Demerits
- Closer control - Slows down decision making
- Better coordination - Distorted Communication
- Closer supervision and fewer mistakes - Distance between top level and
Workers level
- Increased administrative overheads
5. Chain of command
 Is the plan that specifies who reports to whom in an organization.
The result of the decisions about span of control and chain of command is a pattern of multiple
levels in an organization structure which is known as hierarchy. The higher the employee in an
organization hierarchy, the higher will be the employee’s organizational responsibility and Vice-
versa.
6. Coordination: Co-ordination is the process of integrating the activities of separate departments
in order to pursue organizational goals effectively. Without co-ordination, people would lake lose
sight of their roles within the total organization and be tempted to pursue their own departmental
interests at the expense of organizational goals.
- The extent of co-ordination depends on the nature of the tasks performed and the degree of
interdependence of the people in the various units performing them.
High degree of co-ordination is likely to be beneficial for works that is non-routine and
unpredictable, for work in which factors in the environment are changing, and for work in which
interdependence is high.
Symptoms of lack of co-ordination in organization
- Loss of control.
- Excessive conflict.
- Separation of authority and competence.
- Neglected responsibilities in organization

Assignment!
Refer to the available books and:
1. Define Departmentalization,
2. Identify the Basis/types of departmentalization …supported by charts
3. The advantages and disadvantages of all the bases of departmentalization.

4.6 Authority and its Distribution

What is Authority?
Authority is the right to command resources of organizations or the right to give orders within a
given hierarchy to exact obedience. A manager derives authority by virtue of his position as
manager. By virtue of his authority, the manager acquires the right to decide, to act and to
command the persons working under him. Thus, all organizational members have a responsibility
to carry out the best of their abilities, the duties that their superiors assign to them and the
functions of their positions. In other words, authority is the set of rights that enables members to
discharge their responsibilities and it can be viewed from two perspectives.

Classical View of Authority (top-down theory of authority)

According to the classical view, authority originates from a very high level then it is lawfully
passed down from level to level. At the top of the hierarchy may be God or the state. The military
has long operated on this view.
Acceptance View of Authority (bottom-up theory of authority)
Acceptance view of authority finds the basis of authority is the influenced rather than the
influencer. Accordingly, existence of authority is felt only in its acceptance by the influenced and
not otherwise. This view says authority of management is only to the extent of which subordinates
are willing to accept.
Types of Authority
1. Line Authority: defines the relationship between superior and subordinate. It is direct
supervisory relationship. Line authority is represented by the standard chain of command or
it flows downward in an organization directly from superior to subordinates.
2. Staff Authority:-is advisory in nature. Managers whose role is to provide advice or technical
assistance are granted advisory authority. Staff authority is not providing any basis for direct
control over the subordinates or activities of other departments with whom they consult.
(Within the staff managers own department he or she exercises line authority over the
department’s subordinates.”
3. Functional Authority:-The right to control activities of other departments as they relate
to specific staff responsibilities is known as functional authority. It is authority delegated to
an individual or department over specific activities undertaken by personnel in other
departments. Staff departments may be given functional authority to control their systems
procedures in other departments. For example, Audit department has legitimate authority to
control and regulate the activities of other departments such as finance, inventory etc, (here it
can be considered as both expert and legitimate power), and Personnel dep't has legitimate
power to control recruitment, selection performance appraisal system with in other
departments.
Staff - Line relationships
Line authority Staff Authority

General Manager

Legal Research & dvtddDdeDevelopment

Marketing Finance Production

Staff and functional r/ship

Line Authority Functional Authority

President

Marketing Personnel Finance

Credit Funds Acquisition

Advertising Sales
Power Vs Authority
Many scholars argue that terms power and authority are synonymous, but the words are only
related to each other. Power is the ability to exert influence on other people; power can be present
in any relationship. Still, managers are not the only people who can exert influence at
organizations. Employees say and do things to influence managers. Authority on the other side
only holds functional with relationship within organizations.

The Sources of Power

Power does not drive simply from an individual’s level in the organization hierarchy. The source
of power may be present in a variety of human relationships. In an organization, each may occur
at all levels. The following are among sources of power.
Reward Power: - is based on one person (the influencer) having the ability to reward another
person for carrying out orders or meeting performance requirements which may be expressed or
implied.
Coercive power: - based on the influencer ability to punish another individual for not meeting
requirements. It is virtually the opposite of reward power.
Legitimate power: - (formal authority) exists when an employee or influence acknowledges that
the influencer is entitled to exert influence within certain bounds. The right of a manager to
establish reasonable work schedules is an example of "downward" legitimate power. A plant
guard may have the 'upward' authority to require even the company president to present an
identification card before being allowed onto the premises. Simply, legitimate power is the power
which is derived from a person’s official position in an organization.
Expert Power: - is based on the perception or belief that the influencer has some relevant expertise
or special knowledge that the person being influenced doesn't. When we do what our doctors tell
us we are acknowledging their expert power.
Referent Power: - is based on the identification of an individual with who is held in high esteem,
admired, and often imitated by the subordinates. Charismatic managers usually have this power.
Delegation of Authority
Delegation is the assignment of authority and responsibility to others in order to carry out certain
assignments. The chief executive cannot perform all the tasks of the organization himself, so he
must share his duties with his immediate subordinates. Who in turn delegate to their subordinates
and this process continues until all activities are assigned to persons who are made responsible for
performing them.
Delegation is the process of pushing down of authority from superior to subordinates who
possess specialized skill to perform such job. This is because the assignment of responsibility for
some department or job usually goes hand in hand with the delegation of adequate authority to
get the work done.
Delegation of authority is a pre requisite for the existence and efficiently functioning of the
organization. Delegation is a two-sided affair by which the superior must be willing to sacrifice a
portion of his authority and the subordinate must be willing to shoulder the additional
responsibility.
Advantages of Delegation
When used properly, delegation has several important advantages. These are
1) It results in quick decisions.
2) Delegation gives executives more time for strategic planning and policy making: Since the
central mgt will not be involved in day-to-day decisions, it can concentrate its efforts on
higher-level work and problems.
3) Delegation is a Motivational Factor: Subordinates usually respond to delegated authority
with favorable attitude. They become more responsible and more dedicated to their work and
they feel proud of being given the authority.
4) Delegation can be a training ground for executive ability: Subordinates, when given the
control over the problems they face, are able to analyze the situation and make decisions
accordingly. This continuous involvement prepares them for problem solving process when
they reach a higher executive level.
The Process of Delegation
The process of delegation consists of three steps.
1. Assignment of tasks to the Subordinates
In this step, specific tasks or duties that are to be undertaken are identified by the manager for
assignment to the subordinate. However, the distribution and allocation of duties among
subordinates must be fair and well balanced. The tasks should be distributed in such a manner
that the subordinates are not unnecessarily over burdened and that each one is capable of
efficiently completing it.
2) Delegation of authority
In order for the subordinate to complete the duties or tasks, the authority necessary to do them
should be delegated by the manager to the subordinate. A guideline for authority is that it should
be adequate to complete the task- no more and no less.
3) Acceptance of responsibility
Responsibility is the obligation to carry out one’s assigned duties to the best of one’s ability.
Responsibility is not delegated by the manager, the employee accepts it. Then only, the employee
can be obligated.
4) Creation of Obligation or Accountability
Accountability is being answerable to someone for your actions. The person assigned the task is
morally responsible to do his best since he has willingly accepted these tasks. Obligation is a
personal concern for the task. Even if the subordinate gets part of the task done through other
people, the obligation and the accountability still lie with the subordinate.
Barriers to Delegation
A) Reluctance of Executive/Managers
1) An executive may believe that he can do his work better than his subordinates. He might
believe that his subordinates are not capable enough.
2) Lack of confidence and trust in subordinates.
3) Sense of Insecurity. Some managers fell very insecure in delegating authority, especially
when the subordinate is capable of doing the job better. i.e. -Loss of power and competition
from the subordinate
4) A manager may fear being known as 'Lazy' if he delegates most of his tasks
B) Reluctance of Subordinates
1) Fear of criticism and dismissal for making wrong decisions.
2) The subordinates may not be given sufficient incentives for assuming extra responsibility,
which could mean working harder under pressure.
3) Lack of self - confidence in doing the job
4) The subordinate may fear that the superior will not be available for guidance once the
delegation is made and this makes them feel uncomfortable with additional responsibility.
5) Some subordinates hesitate to accept new and added assignments when there is a lack of
necessary information and when the available resources are not adequate or in proper.
Guidelines for Effective Delegation
1) The management must be willing to give employees freedom to accomplish delegated tasks.
This means letting them use choose methods and solutions different from the ones the manager choose. It
also means giving them the freedom to make mistakes and to learn from their mistakes, Mistakes are not
obstacles to stop delegating, but rather an opportunity to offer training and support.
2) Open Communication between managers and employees: Managers who know the capabilities of
their employees can more realistically decide which task can be delegated to whom. The subordinate
must know precisely what he has to know and do. It should be preferably in writing with specific
instructions so that the subordinated does not repeatedly refer problems to the manager for opinion and
decision.
3) Proper Selection and training: The management must make proper assessment of subordinates in
terms of their abilities and limitations before delegating the proper authority.
4) Motivate Subordinates: Adequate incentives in the form of promotion, status better working
conditions or additional browses must be provided for additional work well performed.
5) Establish adequate controls (feedback system): If there are adequate check points and controls built
in the system, like weekly report...etc., then managers will not be continuously spending time in
checking the performance and progress of subordinates and their concerns about subordinates
performing inadequately will be reduced.
Decentralization vs. Centralization
Centralization: is the situation in which authority for most decisions is concentrated at the top of
the managerial hierarchy (selective concentration).
Decentralization: requires the authority to be dispersed by extension and delegation throughout
all levels of management. (Dispersion of authority)
Advantages of Centralization
1. Facilitates the adoption and enforcement of uniform policies and co-ordination of activities, since all
decisions are made at one central point.
2. The quality of the decisions is expected to be higher since the top management who makes decisions is
much more experienced and knowledgeable about organizational problems and situations than the
subordinates.
3. Promotes greater standardization of specialization. Centralization makes it easier to achieve balance
among the activities of different function and division. For instance, if the departments of production
marketing and finances, each went its own way, then each would try to make decisions that would
beneficial to its department, even at the cost of other department. This would be harmful to the
organization as a whole.
4. Centralization results in optimal utilization of human and physical resources.
5. Centralization can be highly motivating and moral - boosting for executives.
It is better to be an important executive of the whole organization than only one unit. It provides
prestige and power, which strengthens the self-confidence which in turn would be useful in
decision making at times of crisis.
Disadvantages of Centralization
1) Concentration of power among few people
2) It hampers the development of lower levels
3) Complicated communication as decisions affecting lower levels are made at the top.
4) Superiors are over burdened with multiplicity of tasks
5) Time is wasted.
Read: Advantages & disadvantages of Centralization & Decentralization